Kunza v. Clarity Services, Inc.

This
matter is before the Court on Defendant’s Motion to
Dismiss. For the reasons that follow, the Motion will be
granted.

BACKGROUND

Defendant
Clarity Services, Inc. (“Clarity”) is a consumer
reporting agency (Am. Compl. (Docket No. 18) ¶ 5),
meaning it assembles credit information about consumers and
furnishes that information, for a fee, to third parties. 15
U.S.C. § 1681a(f). In April 2015, Plaintiff Michelle
Kunza received a copy of her credit report from Clarity,
which revealed that the report had been disclosed in 2014 to
two payday lenders, Flurish, Inc. and RHC/Rolling Hills. (Am.
Compl. ¶ 6.) According to Kunza, she never applied for a
payday loan or any other form of credit from these companies.
(Id. ¶ 7.) This discovery “alarmed and
upset” her, and she undertook an investigation to
determine why her report had been disclosed. (Id.
¶¶ 8-9.) She learned that an unknown person or
entity submitted an online application through a British
company, Quintessential Financial Group, for a payday loan
using her name, email address, home address, phone number,
and social-security number, but incorrectly listing her year
of birth. (Id. ¶¶ 10-11.) Quintessential
sold the application to Flurish and RHC/Rolling Hills, which
in turn requested Kunza’s credit report from Clarity
using the incorrect year of birth on the application.
(Id. ¶¶ 12-14.) Clarity then furnished the
report to the companies. (Id. ¶ 15.)

The
FCRA authorizes a consumer reporting agency such as Clarity
to furnish a credit report to a third party only for certain
express purposes. 15 U.S.C. § 1681b(a). One permissible
purpose is providing a report “to a person [the agency]
has reason to believe intends to use the information in
connection with a credit transaction involving the
consumer.” § 1681b(a)(3)(A). Kunza alleges Clarity
violated this provision here by disclosing her credit report
to Flurish and RHC/Rolling Hills when it should have
recognized, based on the incorrect year of birth provided,
that neither had a valid basis to request it. In other words,
the year of birth was a “red flag” that should
have provided Clarity “reason to believe that [Kunza]
was not involved in a transaction with the Payday Lenders
seeking her consumer report.” (Pl’s Opp’n
Mem. (Docket No. 25) at 3 (emphasis omitted).)

Yet,
the “plain language of the statute . . . focuses on the
intent of the party obtaining the consumer report.”
Trikas v. Universal Card Servs. Corp., 351 F.Supp.2d
37, 42 (E.D.N.Y. 2005) (emphasis omitted). Thus, the key
question is whether the payday lenders intended to use
Kunza’s credit report for a permissible purpose,
namely, to decide whether to loan her money. That is
precisely what the Amended Complaint alleges: Flurish and
RHC/Rolling Hills received an application for credit in
Kunza’s name, and to evaluate whether to extend that
credit, they requested her report from Clarity. It makes no
difference that an incorrect birth year was provided, because
Clarity had every reason to believe the lenders were
evaluating whether to extend credit to Kunza-indeed, there is
no other reason the lenders would have requested her credit
report. See Shepherd-Salgado v. Tyndall Fed. Credit
Union, Civ. No. 11-427, 2011 WL 5401993, at *7 n.12
(S.D. Ala. Nov. 7, 2011) (“§ 1681b(a)(3)(A) turns
on the user’s intent, not on what the actual true facts
may be.”). “The only reasonable inference to be
drawn from the Amended Complaint [is] that the two lenders
sought Plaintiff’s consumer report with the legitimate
intent to process her credit application in the regular
course of their business.” (Def.’s Reply Mem.
(Docket No. 26) at 2-3.) As a result, the allegations do not
plausibly suggest that Clarity lacked “reason to
believe” that the lenders intended to use the report
for a permissible purpose.

This
case is therefore similar to Kennedy v. Victoria’s
Secret Stores, Inc., No. Civ. A. 03-2691, 2004 WL 414808
(E.D. La. Mar. 3, 2004). In that case, plaintiff Kennedy made
a purchase at a Victoria’s Secret store and tendered
her American Express card for the purchase. Id. at
*1. Unbeknownst to her, however, the cashier opened a
Victoria’s Secret credit-card account in
Kennedy’s name and charged the purchase to that
account. Id. To extend this credit, Victoria’s
Secret obtained a copy of her credit report from Experian.
Id. at *3. Like Kunza, Kennedy alleged that Experian
had violated § 1681b(a)(3)(A) by releasing her credit
report without her involvement in the credit application.
Id. The court rejected her argument, noting that
liability turned only on whether Experian believed
Victoria’s Secret intended to use the information to
decide to extend credit to Kennedy-even though she had not
asked for it. Id. The same result follows here.

Kunza
focuses on the alleged fact that the loan application
contained an incorrect birth year, asserting that this should
have alerted Clarity that Kunza was not involved in the
transaction. (See Pl.’s Opp’n Mem. at
4-6 (quoting Andrews v. TRW, Inc., 225 F.3d 1063
(9th Cir. 2000), rev’d on other grounds, 534
U.S. 19 (2001)).) As already noted, however, this argument is
misplaced, because the key fact is the lenders’ intent
in seeking her report. But more importantly, even under
Kunza’s reasoning, Clarity could only have had reason
to believe that the purported loan involved her. The fact
that the year of birth was incorrect while all of the other
information provided was accurate-including Kunza’s
email address, home address, phone number, and social
security number- would not, in and of itself, undermine
Clarity’s belief that Kunza was involved in the
transaction. The FCRA is not a strict liability statute; it
does not demand perfection. See, e.g., Hauser v.
Equifax, Inc., 602 F.2d 811, 814 (8th Cir. 1979).
Carried to its logical conclusion, Kunza’s argument
would mean that any inaccuracy in a loan application, even a
simple one caused by a typographical or transcription error,
would preclude an agency such as Clarity from providing a
credit report, lest it become liable under the FCRA. While
the statute is remedial in nature and designed to be
construed broadly, it does not sweep that far. See
Shepherd-Salgado, 2011 WL 5401993, at *7 n.12; see
also Kruckow v. Merchants Bank, Civ. No. 16-2418, 2017
WL 3084391, at *5 (D. Minn. July 19, 2017) (Frank, J.)
(noting that a “business does not violate the FCRA when
an identity thief causes the business to obtain a credit
report”).

For
these reasons, Kunza’s claim under 15 U.S.C. §
1681b fails. As a result, her claim under § 1681e(a),
which mandates that consumer-reporting agencies maintain
reasonable procedures to ensure reports are furnished only
for permissible purposes, also fails. See, e.g.,
Washington v. CSC Credit Servs., Inc., 199 F.3d 263,
267 (5th Cir. 2000) (“[A] plaintiff bringing a claim
that a reporting agency violated the ‘reasonable
procedures’ requirement of § 1681e must first show
that the reporting agency released the report in violation of
§ 1681b.”). So, too, does her assertion that
Clarity willfully violated the FCRA in contravention of
§ 1681n.

B.
Invasion of privacy

Kunza
also asserts a claim for invasion of privacy under Minnesota
law. Clarity argues that this claim is ...

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